Oil accounts for two thirds of Bahrain's government revenues but its own domestic oil production is small, at around 40,000 barrels per day (bpd). As a result it has traditionally relied on aid from Saudi Arabia. Prior to July 2004, Bahrain received a 50,000 bpd oil grant and the entire 143,000 bpd output from the Saudi Aramco run, but jointly owned, Abu Saafa field. Saudi Arabia's decision to halt the grant and to step back from plans to allow Bahrain to maintain a 100% share of Abu Saafa's output, following a doubling in output to 300,000 bpd this year, cannot have been unconnected to the US FTA.
The UAE and Oman, and to a lesser extent Kuwait, are also in advanced talks with the US about bilateral FTAs. Their response to the latest Saudi action against Bahrain will be crucial in how this issue develops. Certainly greater use of bilateral agreements would be a blow to GCC integration and would raise questions about the commitment of the individual GCC states to monetary union and a single GCC currency: both stated goals of the GCC. However it is more likely that both the UAE and Oman will put their FTA negotiations on hold until Saudi and Bahrain resolve their dispute. How this can be achieved is not clear. One thing is certain however this issue looks set to dominate GCC discussions near-term.
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- Sunday, January 09 - 2005 at 11:59
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Daniel Hanna, EconomistSunday, January 09 - 2005 at 11:59 UAE local time (GMT+4)
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This article was updated on Sun Apr 22 2007.
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